Yet the urgent problem now isn’t TBTF, or even banker bonuses. These are distractions. The urgent problem is the giant riverboat gamble that Washington can save the economy by doing what comes naturally—spending money carelessly, creating massive new entitlements without funding them, dishing out cheap credit to politically favored sectors, telling business people where and how to invest.

Mr. Feinberg is an apt symbol indeed, for this gamble is built on the conceit that Washington can hector the recipients, whether auto companies, banks or homeowners, into behaving in ways that are “responsible.” So far, however, human nature is proving a disappointment: Take the outbreak of tax fraud related to the government’s emergency home-buyer’s credit.

Nor is the larger gamble looking so good either. Banks continue to fail at an alarming rate, the dollar is under assault, and Washington is looking at a future of trillion-dollar deficits. One might have guessed it would take a decade of Obamanomics to produce European welfare state levels of youth unemployment, but at 18.5% we’re there.

About the only positive sign is the price surge in normally uncorrelated assets—stocks, bonds, commodities, gold—as fund managers use cheap credit to play the carry-trade opportunity.

All this might be defensible if time were being bought to clean up an accumulation of past excesses. Instead, the president is creating a new one. It’s no exaggeration to say the Senate health-care bill taking shape is the equivalent of climbing aboard a train about to plunge into a canyon and deciding what it really needs is a bomb on board.

Monday, Jan. 11, was a painful day for Jon S. Corzine, the leader of Wall Street’s most prestigious investment bank, Goldman, Sachs & Co. That morning, from his unassuming office at 85 Broad Street in the heart of New York’s financial district, Corzine called clients and regulators to tell them his astonishing news: He was no longer chief executive of Goldman Sachs. One call was to William J. McDonough, president of the Federal Reserve Bank of New York. ”I think he is a very fine human being and a high-quality professional,” says McDonough, who negotiated with Corzine the rescue of Long-Term Capital Management last September. ”Personally, I will regret that I will not be able to work with him as closely as I did in his previous capacity.”

Later that morning, Goldman put out a terse press release, with the news that Corzine ”has decided to relinquish the CEO title.” He would remain co-chairman to help with the initial public offering of Goldman’s stock, which was postponed when the stock market plunged in August and September. The news about Corzine shocked the Street. Employees were ”blown away,” says one senior manager. Securities & Exchange Commission Chairman Arthur Levitt Jr. says: ”I think he’s probably as broad-gauged a leader as the industry has seen since [former Goldman Senior Partner] John Whitehead.” Some Goldman clients were equally unnerved by Corzine’s demotion, with one corporate client even saying he may take his investment banking business elsewhere. ”My confidence in Goldman Sachs depends on my confidence in Jon Corzine,” he says.

Insiders and competitors alike say Corzine was ousted in a coup within Goldman’s all-powerful five-man executive committee. Corzine was forced aside by a troika of senior bankers: his co-chief executive, Henry ”Hank” M. Paulson Jr.; Goldman’s top investment banker, John L. Thornton; and Corzine’s protege, Chief Financial Officer John A. Thain. ”Everyone liked Corzine. No one likes to see someone ganged up on,” says one insider.

check out how these assholes thought their ivory tower bullshit beat common sense any day….at least all three legacies have been completely sh$t on by this meltdown…

watch pbs’ frontline special to get more insight into how fucked our whole system is….Lawrence Summers to Brooksly Born in 1998: “the whole financial system will collapse if you regulate (i.e. open the hood) on derivatives.”…guess we just waited 10 years for the shitstorm to get 100x as big.